Deputy Director of Income-tax, V. Eaton Technologies Private Ltd., Pune

ITA 1836/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7494 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S S TOMAR
• Keywords: Double taxation relief; Opportunity of being heard; Principle of natural justice
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1755 /P U N/201 4 / ASSESSMENT YEAR : 20 0 7 - 0 8 EATON TECHNOLOGIES PVT. LTD., CLUSTER C, WING 1, EON FREE ZONE, PLOT NO.1, SURVEY NO.77, MIDC, KHARADI KNOWLEDGE PARK, KHARADI, PUNE 411014 . / APPELLANT PAN: AABC E4 323Q VS. THE DY. DIRECTOR OF INCOM E TAX (INTERNATIONAL TAXATION) - I, PUNE . / RESPONDENT . / ITA NO. 1836 /P U N/201 4 / ASSESSMENT YEAR : 20 0 7 - 0 8 THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) - I, PUNE . / APPELLANT VS. EATON TECHNOLOGIES PVT. LTD., CLUSTER C, WING 1, EON FREE ZONE, PLOT NO.1, SURVEY NO.77, MIDC, KHARADI KNOWLEDGE PARK, KHARADI, PUNE 411014 . / RESPONDENT PAN: AABCE4323Q ASSESSEE BY : S /S HRI VISHAL KALRA AND S.S. TOMAR REVENUE BY : SHRI ACHAL SHARMA, ADDL.CIT / DATE OF HEARING : 22 .0 8 . 2017 / DATE OF PRONOUNCEMENT: 31 . 0 8 .201 7 ITA NO. 1755 /P U N/20 1 4 ITA NO. 1836 /PUN/201 4 EATON TECHNOLOGIES PVT. LTD . 2 / ORDER PER SUSHMA CHOWLA, J M : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE AGAINST ORDER OF CIT (A) - IT/TP , PUNE , DATED 04.07.2014, RE LATING TO ASSESSMENT YEAR 20 0 7 - 0 8 AGAINST ORDER PASSED UNDER SECTION 201(1) & 201(1A) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 1755 /PUN/201 4 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER DATED MARCH 25 2013, PASSED BY THE DEPUTY DIRECTOR INCOME - TAX (INTERNATIONAL TAXATION) - I PUNE , ('ASSESSING OFFICER'), HOLDING THE APPELLANT AS AN 'ASSESSEE IN DEFAULT' UNDER SECTIONS 201(1)/ 201(1A) OF THE ACT IS BAD IN LAW, VOID AB INITI O AND LIABLE TO BE QUASHED. 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE ASSESSING OFFICER BEING BARRED BY LIMITATION WAS BAD IN LAW AND LIABLE TO BE QUASHED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ORDER DATED JULY 7 2014 PASSED BY THE CIT(A) DESERVES TO BE SET ASIDE AS THE SAME HAS BEEN PASSED WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN PASSING AN ORDER UNDER SECTIONS 201(1)/ 201(1A) AND THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER TREATING THE APPELLANT AS ASSESSEE IN DEFAULT' IN RESPECT OF PA YMENT FOR ORACLE IMPLEMENTATION CHARGES TO EATON LIMITED, UNITED KINGDOM ('EAT O N UK') ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING T HE ACTION OF THE ASSESSING OFFICER PURPORTING THAT THE ITA NO. 1755 /P U N/20 1 4 ITA NO. 1836 /PUN/201 4 EATON TECHNOLOGIES PVT. LTD . 3 ORACLE IMPLEMENTATION CHARGES, EITHER QUALIFY AS 'FEES FOR INCLUDED SERVICES' OR AS 'ROYALTY' UNDER ARTICLE 13 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND UK ('DTAA'). 4.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DENYING DTAA BENEFIT IN RELATION PAYMENTS MADE FOR ORACLE IMPLEMENTATION ALLEGING THAT THE SAME HAS NOT BEEN DEMONSTRATED BY THE APPELLANT. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C I T(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER PURPORTING THAT THE ORACLE IMPLEMENTATION CHARGES, PAID BY THE APPELLANT, WERE TAXABLE IN INDIA UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. 6. THAT ON THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN LEVYING INTEREST AMOUNTING TO RS.86,32,157 UNDER SECTION 201(1A) OF THE ACT AND THE CIT(A) ERRED IN UPHOLDING THE LEVY OF INTEREST. 7. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT DIRECTING THE AO TO CORRECTLY DETERMINE THE AMOUNT OF REMITTANCES TO EATON UK, AFTER CONSIDERING REVERSAL OF THE CREDITS, FOR THE PURPOSES OF DETERMINING THE CORRECT AMOUNT OF TAX WITHHOLDING A ND THE INTEREST. 4. THE REVENUE IN ITA NO. 1836 /PUN/201 4 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE GROSSING UP U/S 195A OF THE IT ACT, 1961 ON ACCOUNT OF AMOUNT S PAID TO FOREIGN COMPANIES UNDER THE HEAD OF ROYALTIES/FTS WITHIN THE MEANING OF SECTION 9( 1 )(VI)/9( 1 )(VII) OF THE ACT AS WELL AS ARTICLE 13 OF THE DTAA BETWEEN INDIA AND UK. 2 . ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LD. CIT(A) WAS NOT CORRECT IN HOLDING THAT SINCE THE ASSESSEE DID NOT PRODUCE ANY AGREEMENT REGARDING TO GROSSING UP / NON GROSSING UP OF THE AMOUNTS LIABLE FOR DEDUCTION U/S 195 THE AO WAS WRONG IN GROSSING UP THE AMOUNTS PAID. 3 . THE CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE AS SESSEE HAD NOT DEDUCTED TDS U/S 195 FROM THE PAYMENT OF ROYALTY/FEES FOR TECHNICAL SERVICES WHICH CLEARLY SHOWS THAT THE ENTIRE PAYMENT WAS MADE TO THE AE AND NO RECOVERY ON ACCOUNT OF TDS LIABILITY U/S 195 HAS BEEN MADE BY THE ASSESSEE FROM THE AE AND HEN CE IT TRANSPIRES THAT THE TDS LIABILITY IS HOMED BY THE ASSESSEE. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE PRELIMINARY ISSUE RAISED IN THE PRESENT APPEAL FILED BY ASSESSEE VIDE GROUND OF APPEAL NO.2 IS AGAINST THE OR DER OF CIT(A) WHICH WAS PASSED IN VIOLATION OF ITA NO. 1755 /P U N/20 1 4 ITA NO. 1836 /PUN/201 4 EATON TECHNOLOGIES PVT. LTD . 4 PRINCIPLES OF NATURAL JUSTICE BY NOT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT THE APPEAL WAS FIXED FOR HEARING ON 27.05.2014 AND THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE APPEARED ON THE SAID DATE AND PUT FORWARD THE ARGUMENTS. HOWEVER, THE ASSESSEE WAS ASKED TO FURNISH WRITTEN SUBMISSIONS TELEPHONICALLY BY THE CIT(A). IN REPLY, THE ASSES SEE SOUGHT SHORT TIME BUT THE APPEAL OF ASSESSEE WAS DECIDED BY THE CIT(A) ON 30.06.2014. THE ASSESSEE IS AGGRIEVED BY NON - AFFORDING OF PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. ANOTHER POINT WHICH HAS BEEN RAISED BY THE ASSESSEE BEFORE US IS THAT T HE CIT(A) HAS THOUGH DECIDED THE ISSUE ON MERITS BUT HAS FAILED TO ADDRESS THE PRELIMINARY ISSUE RAISED IN THE PRESENT APPEAL WHICH GOES TO THE ROOT OF THE ORDER PASSED BEING BEYOND REASONABLE TIME. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE ON THE OTHER HAND, POINTED OUT THAT TWO DATES OF HEARING WERE AFFORDED TO THE ASSESSEE , WHICH THE ASSESSEE HAS FAILED TO COMPLY WITH AND HENCE, THE ORDER BY THE CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE JURISDICTIONA L ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER THE ASSESSEE WAS GRANTED REASONABLE OPPORTUNITY OF HEARING BY THE CIT(A). THE APPEAL OF ASSESSEE WAS FIXED FOR HEARING ON 27.05.2014 AND ON THE SAID DATE, THE AUTHORIZED REPRESENTATIVE OF ASSESSEE APPE ARED BEFORE THE CIT(A). THERE IS NO MENTION OF WHICH WAS THE NEXT DATE OF HEARING GIVEN IN THE CASE. VIDE PARA 2.15 AT PAGE 9 OF THE APPELLATE ORDER, THE CIT(A) REFERS TO THE ARGUMENTS PUT ITA NO. 1755 /P U N/20 1 4 ITA NO. 1836 /PUN/201 4 EATON TECHNOLOGIES PVT. LTD . 5 FORWARD BY THE ASSESSEE. HOWEVER, THE ASSESSEE HAD NOT FURNISHED ANY WRITTEN SUBMISSIONS DURING THE COURSE OF HEARING BEFORE THE CIT(A) ; HENCE, THE CIT(A) TELEPHONICALLY ASKED THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WHETHER HE WOULD BE FILING WRITTEN SUBMISSIONS. THE LEARNED AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE STATED THAT HE WOULD BE SHORTLY FILING THE WRITTEN SUBMISSIONS. THE CIT(A) NOTES THAT EVEN AFTER MORE THAN A MONTH, THE SAME WERE NOT FILED AND HENCE, THE APPEAL WAS DECIDED ON THE BASIS OF ARGUMENTS MADE DURING THE COURSE OF HEARING AND TH E MATERIAL AVAILABLE ON RECORD. THE PERUSAL OF APPELLATE ORDER REFLECTS THE CIT(A) TO HAVE REPRODUCED THE GROUNDS OF APPEAL RAISED BEFORE HIM UNDER PARA 1.3. THE FIRST AND SECOND GROUNDS OF APPEAL RAISED BY THE ASSESSEE WERE AGAINST THE ORDER OF DDIT BEI NG BAD IN LAW AND CONTRARY TO THE PROVISIONS OF THE ACT AND ALSO THE ORDER BEING PASSED BEYOND REASONABLE TIME PROVIDED UNDER THE ACT. THE PERUSAL OF APPELLATE ORDER FURTHER REFLECTS THAT FIRST AND SECOND PRELIMINARY ISSUE RAISED BY THE ASSESSEE HAS NOT B EEN ADJUDICATED BY THE CIT(A), ON THE OTHER HAND, HE DECIDES THE ISSUE ON MERITS AND DECIDED THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THIS REGARD. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE PLEA OF ASSESSEE THAT SUFFICIENT OPPORTUNITY OF HEARING HAS NOT BEEN ALLOWED TO THE ASSESSEE IN THIS REGARD. ACCORDINGLY, WE REMIT THE ISSUE BACK TO THE FILE OF CIT(A) WITH DIRECTION TO ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE CIT(A) IS ALSO DIRECTED TO D ECIDE THE PRELIMINARY ISSUE RAISED VIDE GROUNDS OF APPEAL NO.1 AND 2 BEFORE HIM. THE ASSESSEE IS ALSO DIRECTED TO COMPLY WITH NOTICE OF HEARING AND FURNISH THE INFORMATION AND THE WRITTEN SUBMISSIONS BEFORE THE CIT(A), WHO SHALL DECIDE THE ISSUE BOTH ON J URISDICTIONAL MATTER AND ALSO ON MERITS AFTER CONSIDERING JUDICIAL ITA NO. 1755 /P U N/20 1 4 ITA NO. 1836 /PUN/201 4 EATON TECHNOLOGIES PVT. LTD . 6 RULINGS ON THE ISSUE. CONSEQUENTLY, THE ISSUE ARISING FROM THE SA ID ORDER OF CIT(A) RAISED BY THE REVENUE IS ALSO SET ASIDE TO THE FILE OF CIT(A) . 8 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST DAY OF AUG U ST , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST AUGUST , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELL ANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - IT/TP , PUNE ; 4. / THE CIT - I / DIT (TP/IT) , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE